Avoiding Potential Problems in a Bankruptcy Proceeding

The U.S. bankruptcy laws were enacted to give debtors a second chance, to allow you to put financial problems behind you and start over again. Under Chapter 7, you have the right to permanently discharge certain debts in exchange for the sale of non-exempt assets. It’s important to understand, though, that those rights are not absolute. If you’ve discharged debts under Chapter 7 or you’ve filed to do so, and the bankruptcy court discovers that you’ve misrepresented your financial situation, your petition can be denied or you may face proceedings for bankruptcy fraud.

Be Honest in All Dealings with the Bankruptcy Court

Debt that was incurred through illegal or fraudulent means will customarily not be eligible for discharge. Accordingly, funds obtained through embezzlement or credit card debt obtained through misrepresentation (falsification of income or debt, for example) will not be available for discharge. If the bankruptcy trustee suspects any type of fraud in the process, the trustee can require a Rule 2004 examination, where just about anyone can be called to testify. In addition, the trustee can request the production of all relevant documents. Rule 2004 allows the trustee to look into all acts, conduct, liabilities, property and financial condition of a debtor.

If the trustee finds enough evidence to support a claim of fraud or misrepresentation, an adversary proceeding can be filed. In an adversary proceeding, the trustee may be able to set aside any fraudulent transfers already made, can revoke a Chapter 7 bankruptcy and can even recover property wrongfully taken by creditors.

You can also lose the right to discharge debt by failing to disclose income or debt during your bankruptcy proceeding. You are required to fully disclose all information about the assets, debts and income. As a general rule, pleading ignorance of the facts won’t get you very far.

Contact Heath, TX Bankruptcy Attorney Carrie Weir

I offer a free initial consultation to all potential bankruptcy clients. Contact my office by e-mail or call me at 972-772-3083 for a private meeting. With offices in Rockwall, Texas, I represent clients in Heath, Greenville, Lavon, Wylie, Mesquite and Rowlett.